On December 31, 2024, the United States Court of Appeals for the Fifth Circuit (the “Fifth Circuit” or the “Court”) held that the “sacred” rights of lenders to pro rata payment under the Serta Simmons Bedding, LLC (“SSB”) credit agreement prevented a non-pro rata exchange of participating lenders’ existing debt for “new” superpriority debt. The Court held that the “open market purchase” exception to pro rata payment - which appears in many credit agreements - could not be interpreted broadly enough to permit such an exchange. The Court also held that the related indemnity granted to the participating lenders in SSB’s confirmed chapter 11 plan of reorganization violated the Bankruptcy Code and should be excised from the chapter 11 plan, overcoming the participating lenders’ arguments that equitable mootness barred the Court’s review and that the indemnity was a permissible component of the Plan under the Bankruptcy Code.